Legislative committee approves bill to revamp auto insurance
A key legislative committee today approved an auto insurance bill that would give carriers more autonomy in setting rates while continuing but reducing subsidies for urban drivers.
The measure, which would phase out state-set rates and phase in competitive rate setting over the next five years, is likely to get a vote in the House but its prospects for passage in the Senate appear slim.
Representative Ronald Mariano of Quincy, the House chairman of the Financial Services Committee, said he reported out the bill with the votes of just nine House members. He did not consult the Senate chairman of the committee or other Senate members.
"There was a feeling that they were not interested," Mariano said.
Senator Andrea F. Nuciforo, the Senate chairman of the committee, called Mariano's bill "dead on arrival" if it ever makes it to the Senate.
"This is a dreadful proposal," Nuciforo said. "It is one of the most consumer-unfriendly measures I've seen in some time."
Nuciforo also charged that a number of the Legislature's rules were violated in how Mariano reported out the bill, which now goes to the House Ways and Means Committee.
At a press conference, Mariano described his bill as a more consumer-friendly version of legislation filed almost a year ago by Governor Mitt Romney. Mariano said his bill was designed to make Massachusetts more like other states in terms of insurance regulation in the hope of attracting more carriers here, while avoiding the huge premium increases that occurred in urban areas the last time deregulation was tried in 1977.
Mariano said his bill would maintain the same subsidies that currently flow from suburban and rural drivers to urban drivers, to keep their premiums affordable. But after the press conference he acknowledged that the subsidies would not remain at their current levels. Critics said the decline in subsidies would lead to dramatic premium increases in areas like Roxbury and Dorchester.
The bill calls for the state's insurance commissioner to set rates for 2007 while allowing insurers, in the aggregate, to deviate upward or downward from those rates by 5 percent. The allowed deviation from the 2007 base rate would increase to 6 percent in 2008, 7 percent in 2009, 8 percent in 2010, and 10 percent in 2011.
Rates for individual drivers would be allowed to rise or fall by a greater amount, but Mariano said the allowed premium increases for liability coverages would be capped at 15 percent.
Mariano's bill would assign drivers that no insurer wants to cover voluntarily to specific companies and allow those companies to charge the driver a higher unrestricted rate. The state's so-called high-risk drivers currently represent 7 percent of the state's 4 million drivers.
Mariano's bill would also continue a 25 percent discount for drivers over 65, which he admitted was not actuarially justified.
(By Bruce Mohl, Globe Staff)
